This paper presents an optimal contracting theory of short-term firm behavior. Contracts inducing short-sighted managerial behavior arise as shareholders' response to conflicting intergenerational managerial incentives. High-return projects may last longer than the tenure of managers who...

Private information and limited enforcement are two frictions that impede the provision of first best insurance against income risk. To mitigate these frictions, insurers make costly investments into technologies such as auditing and enforcement. The implicit assumption throughout most of the...

As auctions are becoming the main mechanism for selling advertisement space on the web, marketing agencies specialized in bidding in online auctions are proliferating. We analyze theoretically how bidding delegation to a common marketing agency can undermine both revenues and efficiency of the...